Why bombs can't stop the City

THERE has probably never been an occasion when the Bank of England's monthly decision on interest rates commanded so little attention. When Governor Mervyn King announced at mid-day yesterday that there would be no change in the cost of borrowing, the minds of most of those who would normally be listening to his every nuance were largely elsewhere.

The setting of interest rates, and indeed the everyday stuff of City life and of this column, seemed terribly irrelevant when set against the unfolding scene of horror from yesterday's terrorist attacks. Yet the Governor's announcement, made without any ancillary comment on the day's atrocities, was also the right response. The best tribute to those who have been killed and injured and the best answer to such terrorist threats was to reaffirm that the City was open for business as usual.

For its part, the Square Mile seems to have acquitted itself well. There was certainly a sense of unreality on the near-empty streets when people were advised to stay in their offices, and a sense of unreality inside, too. It also seemed particularly cruel, and probably added to the sense of shock, that such a thing should happen in a city still riding high on the euphoria of winning the Olympics bid.

It is true too that it is a long time since London had a bomb. One forgets that it is more or less 20 years since the IRA attacked London on such a regular basis that it became second nature to look for suspect packages but otherwise to be determined that life would go on as normal. Sadly, perhaps today's generation is going to have to learn to be equally stoical.

But the markets held their nerve and everywhere there was professionalism, not panic.

Equities were initially marked down more than 200 points and the communications problems associated with the emergency disrupted the Stock Exchange computers, so normal dealing rules were suspended for a time. But that was short-lived. The market recovered its poise and two-thirds of the losses on shares had been eliminated before the close.

It was a similar story in other markets. Activity was muted with the mood, and the fact that some people could not get to work and many more left early to get home. But those who had business they wanted to get done were able to do so. The insurance markets worked as normal, likewise the bond markets and foreign exchange. The world's leading international financial centre continued to function. And it carried on working today along with the rest of London, as Mayor Ken Livingstone said it would. One or two offices were closed. American-owned GE Insurance, for example, told its people to stay at home. But that struck a false note. It was the exception.

Unlike the attacks in the 1990s when the IRA exploded massive car and lorry bombs at the Baltic Exchange and then a few years later at Bishopsgate and in Docklands, yesterday was not an attack against the fabric of the financial community. The later, large IRA attacks were directed against property, designed to destroy buildings, cripple the financial markets and wreak huge economic damage. They succeeded beyond their wildest dreams in the cost attributed to their action, but succeeded not at all in causing sustained disruption.

In the immediate aftermath of the Baltic Exchange bomb, the City Corporation and its then policy and resources chairman, Michael Cassidy, rose to the occasion. He understood the importance of demonstrating to the world that the City would trade on and found space for those who needed it in buildings left vacant by recession.

Even more to the point, firms that could not quickly relocate were given space by competitors so they could keep the wheels turning. Competitors became allies to defeat a bigger enemy and demonstrate that while the City is an international financial centre because of the skill of its participants and its history, it survives because its people don't quit.